College is a dream for students as well as for their parents, and the second thing that comes to your mind after college is Loan. One cannot think about colleges without financial assistance considering college tuition fee and other expenses that comes along like transportation, books costs etc. Many parents desire to help their children to go to college and they plan out things to help them including financial assistance. Also, children too look up to their parents to help them out with educational expenses. To do so often parent would want to and actually take loans.
Though there are varieties of student college loans for parents available in the country but they can broadly be classified into two Federal Student Loans and Private Student Loans. The options that enable college loans for parents is known as Federal student loan made to parents (PLUS Loans). In this kind of loan, the limit to borrow is much higher but the payment to it starts immediately. We all are aware that everything comes with its own pro and cons. In compared to loans given to students, credit history is considered while college loans for parents and unlike student loans approval here is not automatic even if the student is meeting the program requirements. But it is still considered a better option than Private Student Loans available to both parents and students.
In Private student loans, the limits that are imposed are much higher and no payments occur until after graduation. Though that does not mean that one is benefitting as the interest begins to grow immediately and the delayed interest is added to the principal on college loans for parents. Unlike subsidized student loans which belong to federal loans interest is on the delayed interest as well in case of Private Loans. Also decided by the United States Congress, interest rates are much more than those of federal loans and they are usually seen as the last option by any for whom other loans and federal loan programmes are no more available. One thus must not be surprised when financial aid officers from any college advices you to borrow utmost under federal programs before opting for private loans.
PLUS Loans on the other hand, considering their limit, are seen capable enough to cover the cost of everything that student’s financial aid leaves out. In other words, parents look after everything that the student is unable to look for himself/herself. Interest keeps adding on the loan while the student is in school and the payments begin when the student has finished in schooling. Though smart savers with enough financial capital choose to start earlier payments on their own willingness to save on the burden caused by interest.
It is important to note that PLUS loans are different from ‘Co-signer Loans’ and it is only the parent who is responsible for the repayment of loan and not the student. With zero student accountability parents are asked to sign ‘Master Promissory Note’ to repay the loan. If there is a failure in repaying the loans it is the credit rating of the parents that suffers as they are the only one accountable. All this information will enable you to take a better decision for yourself and the other with enough clarity while applying for college loans for parents.
It is thus advised to parents to always first consider their monthly income for college loans for parents because this is everything it rests on. They should be sure of what their current monthly income is and what would be in the coming four years as what may sound easy and manageable to pay now may not be as simple after four years of accumulation. The rate of interest should always be kept in mind and one should remember that although initial loan documents often give repayments schedule as if only one year of loan was taken out and there are other years too to deal with always having possibilities for uncertainties and fluctuations. This can be better explained with the help of an example. For instance, you might have an idea of around $200 a month in the beginning of the loan which sounds manageable but with interest added upon it would be increased up to $800 a month by the time one reaches to the fourth year of college that has been funded through loans. So, one must do enough and careful calculations before taking any final call. It is also advised to be updated with the rate of interest set up by the United States Congress as the political scenario is and always affects the educational structure by having power over federal loan, rate of interest and other expenses for college loans for parents.
“Tag: College Loans for Parents”
